Paying down debt

by Nick on February 15, 2012

This is a guest post:

The debate between debt management plans or do-it-yourself debt reduction is one that freezes even the most dedicated debt destructor. One frequent stumbling block is the fee for the non do-it-yourself plans, which is often a percentage of your monthly payments. Some companies, however, are funded by others or for whatever reason are low or no cost.

In any event, like with any financial plan, it is vital to read everything you can about what is involved. If you hire a company to assist you, it is also important to read every piece of literature about the particular company you plan to hire before you do so. Also, the effects of the specific plan or what you are planning on doing yourself on other parts of your finances are also important pre-plan information so you can make an informed decision about what’s best for you. In short, the decision to put a plan in place, do-it-yourself or otherwise, is one that needs to be taken very seriously.

More importantly, any plan to pay down existing debt is only as good as the other side of the equation – stop debt from piling up. That involves a change in your personal habits from someone who buys stuff and then pays for it to someone who saves up and then buys stuff. After all, what good is paying off debt only to be neck-deep in a new pile of credit card debt two years later?

Changing your borrowing habits is an emotion process for many people. Sometimes people see use of credit, even with carrying balances and paying some interest on purchases, as a necessary part of running your finances. Others take the other extreme, arguing that any credit use is irresponsible and should be avoided. Perhaps somewhere in the middle is the correct answer.

At the end of the day, if you are drowning in a pile of debt, one thing appears clear: your plan probably is not working very well. Perhaps it is time to try something new. Paying down debt is likely only one part of an appropriate plan. Stopping the borrowing is equally important.